Technically Speaking

May Premiums Hit New Highs

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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While May soybean oil is trading at its highest May prices in more than 12 years, the May premium over the July contract hit a high of 9.99 cents Thursday, April 29, the highest in at least 60 years and an extremely bullish sign of demand (DTN ProphetX chart).


May soybean oil closed up 5.75 cents last week, ending at a new weekly high of 68.46 cents, the highest weekly close for a May contract in over 12 years. As impressive as the new high is, the May premium over the July contract finished at 6.07 cents Friday, reaching the highest premium by far this week in at least 60 years and probably on record. The spread reached a high of 9.99 cents on Thursday, so trading was extremely volatile, and we wonder if the volatility is a warning sign of a topping market. It is also odd soybean oil had 1,117 contracts delivered in the first two days -- more than one would normally expect for a tight market. Overbought indicators are not typically reliable in markets with fundamental shortages, and anxiety levels are high, making predictions futile. At some point, the extreme activity will exhaust itself, but it is difficult to say when. Trends remain up for now.


May corn closed up 84 1/2 cents last week, ending at a new eight-year high of $7.40 after the CME reported no deliveries for May corn. May corn prices pushed to new highs in early April and have not been below their 100-day average since August 2020. The premium in May corn over July closed at 66 3/4 cents Friday, surpassing the old 2013 peak of 62 1/2 cents -- another bullish benchmark showing just how strong commercial demand has become for corn. Technically speaking, the uptrend in corn has been going on since August and has yet to challenge noncommercial net-longs in any significant way. The trend turned steeply higher in April and has shown no sign of reversal yet.


May soybeans closed up 31 1/4 cents last week, ending at $15.71, its highest weekly close in over eight years. Similar to the two examples above, May soybeans finished 36 3/4 cents above the July contract Friday, the second largest May premium since 2010 and also showing strong demand for limited supplies of soybeans. On Tuesday, April 27, May soybeans posted a technical reversal, but did not close below Monday's low, so it is less likely to be a significant top. Tuesday's high of $16.08 3/4 will be watched for possible resistance, but there is no sign yet of the trend turning lower or of noncommercial net-long positions being challenged in any significant way. So far, the trends remain up for these three bullish markets.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities and futures contracts involve substantial risk and are not suitable for everyone.

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